Imported beers have really taken it on the chin in the past two years. After years of growth, the category as a whole declined about 5.4% in 2008, and sales fell another 5.5% last year. Not since the recession of 1991-92 has the import category seen its numbers in negative territory, and most people can’t remember a decline before that.
‘The category has experienced a bit of a perfect storm,’ said Jeff Coleman, president of Paulaner HP USA.
The global recession, obviously, has been at the heart of category woes. In the face of the hit on consumers’ spending power, imports have become more expensive to bring into the U.S., Coleman said. One factor is the strength of the Euro and other currencies against the dollar. Another is the rising cost of fuel and freight charges.
Ongoing consolidation in the industry, marked most recently by Heineken’s deal to acquire FEMSA, is helping major brewers trim costs. That can help them maintain margins, at least temporarily, while keeping prices stable or increases modest.
Change in Buying Habits
But this recession, more than any in recent memory, has caused a sea change in consumer buying habits. In every downturn consumers tend to watch their spending more closely. The sub-premium beer segment, for example, always sees sales increase when times are tough. But imports have largely been recession-resistant because consumers have seen them as a small, affordable luxury. This time around is different.
‘This downturn has affected imports more than any other class of beer,’ said Mike Browne, vice president, above premium, at MillerCoors. ‘Basically, straight demographics are responsible. Newly immigrated Americans are big import drinkers, and a lot of import consumption is on both coasts. Look at places like Florida, California and New York, which are big import markets. They’ve been disproportionately hit harder than others by the recession.’
Plain and simple, consumers are spending less across the board. They’re eating out less often, where they often consume imported beer, and they’re spending less and more wisely at home.
‘Consumers are making better value-based decisions,’ said Christian McMahan, chief marketing officer at Heineken USA. ‘They want to know, if they’re going to spend more for a product, what they’ll get for it.’
Small Is Sexy
A prizefighter used to winning, the import category now has gone a couple of rounds in which it’s taken some hard hits. But don’t count imports out. Since the two biggest brands account for about 40% of category sales, when their sales fall, so do category numbers. The fact is that several import brands continue to grow, some by double-digit rates.
One of the biggest changes in consumer behavior wrought by this recession, in fact, is this new scrutiny of what constitutes value.
‘Consumers are not spending as much on high-end goods,’ said Trevor Burnell, vice president, Moosehead, ‘and their loyalty to brands has been rattled. They’re more open to options.’
‘Consumers are being more thoughtful about their purchases,’ said Steve Cohen, vice president sales, Diageo Guinness USA. ‘There is more of a back-to-basics attitude, and consumers are looking for brands with real credentials.’
Turns out while big may be beautiful, small brands are really much sexier to consumers as long as they are unique in some way. Image alone isn’t enough to get consumers to trade up to imports. But brand traits like heritage, authenticity, unique ingredients and taste can differentiate them and give consumers reasons to discover them.
The same attributes that have helped craft beers grow and compete with big mainstream brands have given legs to smaller imported brands in the face of competition from the major imports.
‘We have to make sure consumers see that value,’ said Burnell, ‘and only some of that added value is image.’
The movement has big brewers consolidating and picking up portfolios of smaller brands in the process, or acting more like small brands in terms of programs and communication with consumers. As a result, a lot of imports are finding their niche and growing quite nicely despite the economy.
The Anheuser-Busch InBev merger, for example, put a host of smaller brands from Belgium and elsewhere in A-B’s stable alongside the Clydesdales. The brewer is putting a lot of resources and A-B muscle behind labels like Stella Artois, but in a way that capitalizes on the strengths of those imports.
‘We’re not a big import player,’ said MillerCoors’ Browne. But the gradual combination of SAB, Miller, Coors and Molson in the past few years puts well known and respected brands from Pilsner Urquell and Grolsch to Peroni, Molson and CosteÃ±a.
Heineken’s deal in January to purchase Femsa gives it even more vested interest in marketing the Dos Equis, Carta Blanca and Tecate brands. The reshuffled deck resulting from the A-B InBev deal also put Newcastle in Heineken’s portfolio.
The landscape may have changed, both in terms of which players hold which brands and an economy that has sapped jobs and disposable income, but imported beers still offer retailers tremendous opportunities.
‘The right brands in the right pack with the right support behind them can still grow,’ said McMahan. ‘We have to make a choice about where we do that. So do retailers.’
Here’s a rundown on who’s doing what.
After a lover’s spat late last year over spending on marketing, Grupo Modelo and its importer Crown Imports, LLC, kissed and made up. In January, Crown unveiled a host of new programs to its distributors and jumps in TV ad spending on Corona of 16% to the general market and 53% to the Hispanic market. New creative this year continues the evolution of the current campaign. The number-three import Modelo Especial, which saw an 7.8% increase in sales last year, gets a bump in national TV ad spending of 46%.
Cinqo de Mayo remains a big promotional period for both brands. Corona and Corona Light will be featured in a ‘Corona de Mayo’ program with heavy retail display support and TV advertising. New this year for Modelo Especial is television advertising during the Cinqo de Mayo promo period.
Corona is doing a big, beach-themed summer promotion for the general market, offering consumers a chance at 100 trips to Mexico, and 1,000 other prizes, mostly beach kits that help consumers create an ‘at-home’ beach. (In California the merchandise will be offered at discounted prices instead of as prizes.) The brand also will offer $3 IRCs for Old El Paso products in grocery chains where legal.
Modelo Especial’s big summer push is a tie-in with Sports Illustrated magazine to promote World Cup soccer. Special editions of SI in both English and Spanish will feature the brand. Consumers can get an IRC with the purchase of Modelo Especial good for $2 off the $5.99 cover price of the magazine.
Corona and Corona Light also will have a presence in Hispanic markets during the World Cup. The brand is doing limited edition shrink wrap labels featuring Mexican soccer team logos.
Negra Modelo’s major promotion this year is a tie-in with Golf magazine’s ‘100 Best Clubhouses’ issue this summer. The magazine’s focus on food and beverage helps position Negra Modelo as a high-end import brand.
Pacifico, Crown’s other brand from Grupo Modelo, is sponsoring the U.S. Open of Surfing in California in July. An ‘Epic Adventure’ promotion with display materials supports the brand during the period.
Last year’s St. Pauli Girl, Katarina, was so popular with retailers and consumers, the brand isn’t holding a contest for a new one this year. Rather, the brand asked consumers in February to vote for one of two posters featuring Katrina. She’ll continue to travel the country making retail appearances, especially during the brand’s big ‘Oktobeerfest’ promotion period this fall.
Tsing Tao, of course, just came off its major push during Chinese New Year, supported by chef Martin Yan doing a satellite media tour. Celebrating the ‘Year of the Tiger,’ the brand raised awareness so consumers will think of Tsing Tao when they cook Chinese food at home.
‘We’re absolutely seeing the light at the end of the tunnel,’ McMahan said of Heineken’s sales slide in the midst of the recession.
Heineken is intent on getting its groove back, and the ‘Give Yourself a Good Name’ campaign is a big part of that. In its first year, the meaning behind the campaign and the idea it was meant to convey were slow to build. A new agency of record and a twist on the campaign keeps it fresh, and the brand will drill down deeper to find out what resonates with consumers to help fine tune the message.
What the brand will do differently this year is tie its sponsorship assets such as the U.S. Open tennis tournament, Tribeca Film Festival and Coachella music festival tour to its campaign theme.
McMahan said he expects the effort to start hitting its stride for Heineken this year in much the same way the Dos Equis campaign has. ‘It goes to show that if you have the right things in place and have consistent message you can grow a brand in tough times,’ he said.
Dos Equis is one of the import segment’s, and beer industry’s, fastest-growing brands. Everything from packaging to events now is built around the ‘world’s most interesting man’ theme, and the plan is to continue to do more of the same types of promotions and events that have proven successful for the brand.
Heineken USA picked up Newcastle in September ‘08, and has just started to push the brand. Consumers see it as a craft beer, so it’s being treated as a discovery brand, with the company focusing on a less traditional campaign. A redesigned website will let consumers interact with the brand on a national level, and local market activities will offer them playful, clever ways to associate with the brand. A test of a draft keg and a summer ale last year was very successful. Distribution of both will be broadened this year. To build loyalty, Newcastle will continue to offer its ‘design your own label’ program, which gives consumers the tools to make the brand their own. Those who participate become vocal brand ambassadors.
After a tough year, Amstel Light took steps to reposition its ‘one damn good beer’ campaign. A new package just hit store shelves, and local marketing programs that give the brand more European flavor are being expanded nationally.
Heineken USA’s other top Mexican brand is Tecate. With a very clear focus, the brand has targeted Hispanic consumers in the U.S. ‘ specifically Mexican men who have lived here less than five years ‘ with the right price-value equation.
‘Tecate has been able to stay afloat in this environment because of a very consistent strategy,’ said Felix Palau, vice president, marketing, ‘know the consumer, connect emotionally with consumers and bring the brand to life.’
Last year, the brand settled on boxing as a vehicle to reach its audience, sponsoring more than 130 bouts. This year includes a year-round association with the sport and sponsorship of more regional events that will be supported with ticket giveaways and special packaging in key markets.
Tecate also plans a heavy presence during the World Cup this summer, including sponsorship of autograph signing events with Mexican soccer legends, a commemorative package, retail support and grass roots events in June and July.
The company’s Bohemia brand continues its association with high-end Mexican cuisine to build awareness, like its partnership with Frontera Grill chef Rick Bayless.
With the huge number of brands InBev brought to its merger with Anheuser-Busch, the combined company is a powerhouse in the import segment. But with that many brands, the brewer has to pick and choose where to apportion marketing dollars.
‘Just as in 2009, Stella Artois will receive the majority of our import investment in 2010,’ said Andy Goeler, vice president, imports, crafts and specialty at A-B InBev. ‘Of all the beers in the category, Stella Artois has really bucked the import trends in the U.S. market.’ The brand gained 10% in 2009.
As the brand continues to build distribution, distributors will push hardest to place signature glassware in on-premise accounts and educate servers about the Belgian ‘pouring ritual.’ In Belgium, beers are served in their own unique glasses designed to highlight each brew’s aroma and flavor.
‘The Stella Artois Chalice is the most recognizable Belgian beer glass,’ Goeler said. ‘The glass itself is becoming an iconic symbol of the brand.’
Programs begun last year, such as sponsorship of film and entertainment events like the Sundance Film Festival and culinary events such as the Aspen Food & Wine Classic, will get bigger this year. As awareness grows and more consumers look for the brand in off-premise accounts, the brand hopes retailers will consider unique merchandising opportunities, such as displaying product in food and wine aisles.
Beck’s, what A-B InBev considers its other ‘global’ brand, will get plenty of retail support in the form of POS and promotions during key sales periods like Octoberfest. ‘Multi-country’ brands Hoegaarden and Leffe will get a push in key markets where A-B InBev hopes to expand distribution with an emphasis on tastings and consumer education.
‘Local champs,’ like Bass, Staropramen, Boddington’s, Murphy’s, LÃ¶wenbrÃ¤u and Spaten, round out the broad portfolio, many of which could be right for retailers in individual markets.
SABMiller likes to think of itself as a local brewer wherever it does business, but all those brands make it one of the three largest brewers in the world. Several of those beers are truly global brands.
‘As a niche brand player,’ said Browne, ‘we’re focused on what makes each of these brands unique.’
Grolsch, with its iconic swing-top bottle, has a new logo or mark that helps reposition the brand as a maverick character. ‘It’s an underutilized asset,’ Browne said of the bottle, ‘so we’re going to focus on the drama of the swing top in on-premise accounts. We have to focus on what will move the brands.’ The attention could push more consumers to search out the bottle at retail.
Peroni sponsors the Italian soccer team, and with the World Cup coming this summer, promotions will revolve around that event. Pilsner Urquell continues to sponsor the British Open golf tournament, giving a prestige connection to a prestigious brand.
Molson, the brewer’s Canadian brand through its MolsonCoors partnership, has seen sales remain strong in its core markets, and continues to get a strong rub from its association with NHL hockey. Molson Canadian, in particular, is an easier trade-up for consumers than to a mainstream import, and a choice that offers great value. Canadian X gets 12-oz. can packaging this year, and the brand has aggressive merchandising and limited edition packaging plans this year. Look for things like variety packs.
‘Retailers have so much choice in beer we’re trying to make the brands in our portfolio easy to work with,’ Browne said. ‘We’re bundling brands to give them more scale, as a European group, for example, like a tour of European countries. We suggest retailers stock them as a group of prestige imports instead of individual brands and offer variety packs, including some of our Polish beers in Chicago and New York, or CusteÃ±a and other Latin American beers in California markets.’
Diageo Guinness USA
‘Premium purchases are still occurring,’ said Diageo’s Cohen, ‘but consumers are being more disciplined. So the new consumer is very motivated by quality, and our portfolio with Guinness and Smithwick’s plays right into that.’
Brands like Guinness are iconic. Guinness just came off its 250th anniversary celebration with a limited edition Stout in bottles and on draft. And it’s in the midst of its big March St. Patrick’s Day push. Key this year are the brand’s new ad campaign, ‘Fortune Favors The Bold,’ and a tour of key markets by Guinness master brewer Fergal Murray.
Since small, not big, is beautiful this year, it is brands like Red Stripe that brewers get excited by. Red Stripe Light, already in Florida and Georgia, launches nationally this spring. The launch has media and marketing support, including a Facebook page for the Red Stripe Ambassador.
Labatt USA, now part of North American Breweries, Inc., Buffalo, N.Y., just wrapped up its third annual Labatt Blue Buffalo Pond Hockey Tournament. Played on the icy surface of Lake Erie at the Erie Basin Marina in Buffalo, 112 teams competed in approximately 14 divisions, over two cold, long days. The brand also expanded its association with professional hockey by opening the Labatt Blue Zone in Buffalo’s HSBC Arena, and signed on as the official Canadian import beer of the Buffalo Sabres.
Moosehead USA, importer for Canada’s last independent major brewer, also has reorganized after taking over U.S. operations from Gambrinus in 2007.
‘Moosehead’s a smaller brand, so it has less border to protect,’ Burnell said. ‘We have a focused approach, and put resources where consumers make their purchase decisions. We’ve seen significant growth where we’ve invested in the brand. We’re taking our strengths as a small brand and using them to our advantage.’ The brand plans limited edition cans later this summer. Big news for the brand this spring is the launch of Moosehead Light Lime in six states ‘ PA, MN, MD, MA., RI and NJ ‘ after a successful rollout to Canada’s eastern provinces last year.
Paulaner is back in business on its own, this time as Paulaner HP USA. After being shuffled into the Star Brands portfolio for several years, Paulaner and other brands that were once part of Paulaner N.A. and then Distinguished Brands Int’l., are now back under one roof again under the command of Jeff Coleman. In addition to Paulaner, the line-up includes Hacker-Pschorr, Fuller’s Ales, Dolomiti Birra and O’Hara’s.
Given the state of the global economy and the declining value of the dollar against European currencies, Coleman has focused his company’s attention on wringing out costs of importing the brands to make them more price competitive.
Fuller’s, which has been hardest hit by both the recession and competition from craft beers, according to Coleman, is introducing three new draft beers ‘ Chiswick Bitter, Organic Honeydew Ale and Mr. Harry QBA (‘quintessentially British ale’).
O’Hara’s, a young Irish craft brewer, also is expanding its portfolio from two (Stout and Irish Red) to include a cumin wheat beer.
Both Paulaner and Hacker-Pschorr have changed from 32-oz. bottles to 33cl bottles, eliminating a special bottling line for export, again to help save costs to distributors and ultimately consumers.
Unibroue continues to market its eclectic line of French-Canadian beers from Quebec. Modeled after Belgian and French beers, the line includes La Fin Du Monde, a 9% ABV triple ale, Blanche de Chambly, a white ale, and Trois Pistoles, a strong dark ale. Quelque Chose, an ale the brewery issues only once every six years or so, can be aged until 2025, according to the label. It was launched in February. The brewer also expects to introduce a vintage beer sometime in late summer or early fall.
Importers have found it isn’t only heritage and authenticity that connects with consumers. At least one brand thinks it can use the approach of social responsibility to appeal to socially conscious consumers. Lhasa Beer USA imports a lager from Tibet, returning a portion of every bottle sold to the Tibetan people to help them achieve independence from China.